Australian federal court has issued a split decision in a case brought by regulators against crypto financial services company Block Earner. While dismissing allegations around one product, the court upheld claims that it offered a service that violated licensing requirements.
Presiding Justice Ian McNeil Jackman ruled that Block Earner’s decentralized finance (DeFi) “Access” tool enables customers to interact with protocols in a decentralized manner without requiring an Australian Financial Services (AFS) license. However, agreed with the Australian Securities and Investments Commission (ASIC) that the startup’s crypto-backed “Earner” product constitutes an unlicensed financial offering under the law.
ASIC initially sued Block Earner back in November 2022 over claims it facilitated unregulated investment schemes promising fixed returns from crypto assets. Deputy chair Sarah Court highlighted the significance of receiving judicial clarity on appropriate regulation for certain crypto offerings.
“This important decision clarifies when crypto-backed products should be considered financial products that require licensing,” the Court stated.
A scheduled March 1st hearing will determine penalties against Block Earner regarding the “Earner” product’s violation. The company can proceed unaffected with its “Access” service based on the court’s dismissal of those allegations.
The case comes amid growing regulatory pressure on cryptocurrencies in Australia. Last May, regulators instructed local banks to prepare detailed reporting on exposures to crypto platforms and enhance risk monitoring. The government also proposed expanded oversight of digital asset providers as conventional financial institutions.
In response, industry group Blockchain Australia has spearheaded consumer protection initiatives around cryptocurrency scams and fraud. Enhanced education aims to caution retail investors while avoiding blunt prohibitions that could stifle innovation.
As virtual currencies penetrate mainstream finance, authorities walk a fine line between managing risks and embracing potential. Ongoing court judgments, like Justice Jackman’s Block Earner ruling, offer guideposts for balancing prudent regulation with technological progress.
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